Almost $500 million a year was taken out of Cambodia in “illicit financial flows” between 2001 and 2010, a report released yesterday in the U.S. claims.
People in the Cambodian finance sector, however, expressed doubts about the accuracy of the figure, which appears in a report by the Washington-based research organization Global Financial Integrity.
The report, titled Illicit financial flows from developing countries, analyzes World Bank and International Monetary Fund data on 143 countries’ balance of payments.
The organization looked at the discrepancy between trade recorded in Cambodia and trade with Cambodia recorded by the rest of the world.
It concludes that during the decade, a total of $4.99 billion has been taken out of the country through illicit financial flows—“funds that are illegally earned, transferred, or utilized and cover all unrecorded private financial outflows that drive the accumulation of foreign assets by residents in contravention of applicable laws and regulatory frameworks.”
The report says the method of calculation does not take into account smuggling, cash being taken across borders and other forms of capital flight that might also account for money leaving a country.
The authors acknowledge that some legal flows of capital may go unrecorded, and the report says total estimates have been reduced to take this into account.
However, former ANZ Royal chief executive Stephen Higgins said by email that the group’s nearly $500 million a year figure “simply doesn’t match the reality on the ground here, which is that there seems to be more money sloshing around here than can be accounted for by the official statistics.”
“That is, it seems to be flowing into the country rather than out of it,” Mr. Higgins said.
He explained that in other countries—including China, the country to which the report attributes the most illicit financial flows—there are strict controls on capital, which means people manipulate declared trade prices to extract capital from the country.
“Cambodia is different to most of the countries identified in the report, in that Cambodia has such an open capital account, which means it’s very easy to legally move money in and out of the country,” Mr. Higgins said.
“It is not necessary to make illegal transfers to get money out of the country.”
Nuon Sokha, director-general of the National Bank of Cambodia, said the $500 million discrepancy, if correct, was “minimal” in comparison with total trade in Cambodia, which reached $12.31 billion in the first 11 months of this year.
“The recording system is still emerging so that is a very good report,” she said, adding that steps had been taken to ensure that banks keep an eye on suspicious transactions, including the establishment in 2008 of the Financial Intelligence Unit.
Acleda bank president In Channy also expressed doubts about the report, saying that the informal nature of many agricultural transactions along Cambodia’s borders meant trade figures were not reliable. Of the report’s figures on Cambodia, he said, “It’s an estimate only.”
Preap Kol, executive director of Transparency International’s Cambodia office, said by email that countries with weak laws and financial controls attract illicit funds.
“In any country where the laws and regulations of financial control are weak or not effectively enforced and where transparency in financial and banking sector is limited, it is often a destination of illicit financial flow and money laundering,” Mr. Kol said.
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